Commercial vehicle loan: Interest rates, eligibility, online application

A commercial vehicle loan is a type of loan offered to businesses (e.g., transporters and logistics companies) to purchase a vehicle for business purposes. Most banks and NBFCs in India offer vehicle finance to MSMEs and large businesses to enable them to purchase vehicles that can be used in commercial activities. A commercial vehicle loan interest rate is different from a regular business loan interest rate, as it is determined by the borrower’s profile, type of vehicle, loan amount and other factors. Let us look at the meaning of a commercial vehicle loan, borrower’s eligibility, interest rates offered by banks, application process and more.

What is a commercial vehicle loan?

If you want to start a truck transport business or a logistics franchise business or similar, you will need funds to buy vehicles. A commercial vehicle loan offers you the funds you will require for it. These loans can be applied for online and offline, come with attractive interest rates, flexible repayment tenure and quick disbursal.

Most lending institutions offer vehicle finance for new and pre-owned vehicles. Interest rates are competitive and based on the borrower’s creditworthiness, vehicle category and manufacturing brand, location and other factors.

Based on the bank you are borrowing from, vehicle financing can be taken for electric vehicles (EVs), CNGs, hybrid commercial vehicles and caravan travellers for travel.

Note: In many cases, banks do not require additional collateral for commercial vehicle loans. The vehicle purchased is considered collateral against the loan.

Commercial vehicle loan interest rate for businesses in India

Before diving into the features and eligibility of commercial vehicle loans, let us take a look at the interest rates offered by different banks and NBFCs.

In general, commercial vehicle loan interest rates range from 9 – 24% p.a. depending on the factors mentioned previously.

*This is for information only. Borrowers are requested to contact the bank/NBFC for the latest interest rates and lending terms. Source: Respective bank/NBFC websites.

Eligibility criteria for commercial vehicle loans

There are some basic eligibility requirements that one must meet to apply for CV loans. Listed below are some of the general eligibility requirements, though lenders can choose to omit or add criteria based on their policies and the borrower’s profile:

• Indian citizenship, age within 21 – 65 years
• Satisfactory financial track record of individual and business
• Udyam MSME registration certificate for MSMEs
• Type of business: Proprietorships, partnership firms, limited liability partnerships, private companies, fleet owners, trusts and societies, self-employed, and individuals engaged in transportation business or hospitality etc.
• Business vintage:
• Salaried borrowers and self-employed individuals: 2+ years
• Logistics businesses and fleet operators: 1 –3 years of vehicle ownership
• Private/Ltd. Companies, trusts, societies, partnership firms: 2+ years existence and audited financials

Documents required for commercial vehicle loans

The list of documents required for CV loans is similar to documents required for business loans. Borrowers are requested to check with the financial institution for the latest requirements list. Some of the commonly asked documents for commercial vehicle financing are:

• Duly filled in application form, 2 passport sized photo
• Photo identity, age proof, address proof and others as per KYC guidelines: E.g., Aadhaar card, PAN card
• Income proof: E.g., Audited financials for last 2 years, bank statements, ITR
• Vehicle ownership details: I.e., documents on list of vehicles owned by the borrower, insurance, RC copy etc.
• Repayment records (if any)
• Proof of experience: E.g., commercial vehicle registration copy

Features: Commercial vehicle finance

Let us take a look at some of the common features of commercial vehicle loans.

• Commercial vehicles loans are usually offered without any collateral asset as security (check with the bank on down payment on loan)
• Interest rates vary depending on the borrower’s profile, loan amount and tenure
• Vehicle financing (can be up to 100% financing) is usually offered to businesses in logistics and transportation and to businesses/individuals requiring vehicles for commercial purpose
• Processing time is quick, with loan disbursal in as less as 72 hours

Commercial vehicle loan EMI calculator

As a business owner, how do you know what’s the EMI you will have to repay when you borrow a commercial vehicle loan. Let’s understand with this example:

Amount required: ₹1,00,000

Interest rate: 11%

Tenure: 2 years (24 months)

Based on calculations
Monthly EMI: ₹4,661 (for 2 years at 11% p.a.)

Interest payable: ₹11,859

Total amount payable: ₹1,11,859

You can learn more about business loan EMI calculations for connect with your nearest bank for details on your EMI and other requirements.

Next steps: Applying for vehicle financing

As a closing thought, if you need vehicles for your business, consider taking vehicle finance. It’s a smart choice for enterprises looking at growing their business, reducing transport costs, or even saving time and the hassle of negotiating with logistics partners.

You can apply online and offline for a commercial vehicle loan. The process is similar, though it’s faster when done online.

For offline application:

• Visit your preferred NBFC/bank branch
• Collect the loan application form
• Speak with a relationship manager for guidance and assistance
• Check eligibility, calculate EMI, and collate all documents
• Fill in the form, attach the documents and submit the form
• Get a response within 7 days after the bank officials have your documents and application
• Wait for the funds to be disbursed within another week’s time

For online application:

• Visit the bank/NBFC official website and click the ‘Apply now’ (or similar) option for vehicle loans
• Fill in all details (personal and professional) along with mobile number and email for OTP verification
• Upload the required documents and await a call back from the bank/NBFC on the next steps

Alternatively, you can also call the bank’s customer support numbers or connect with a loan direct sales agent for any assistance.

FAQs

Author: Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.